ASX shares in Fortescue closed on Tuesday at $2.79 – up 29% over the last week.
The Pilbara miner’s success was driven in part by the record-breaking 19% surge in the iron ore price on Monday, which adjusted down just 11c on Tuesday, to a spot price of US$63.63 a tonne.
But Fortescue also announced this week a memorandum of understanding between it and Brazilian mega-miner Vale, with the aim of working together to improve supply to China, the world’s largest iron ore importer.
The agreement, announced on Tuesday, March 8, proposes the formation of one or more joint ventures for the blending of certain volumes of iron ore from both companies.
Fortescue says the potential joint venture, or ventures, could develop blended products “to suit the long term needs of our customers and improve the efficiency of the supply chain to the steel industry”.
Nev Power, Fortescue’s chief executive, said the MoU opened new opportunities for both companies.
“The MoU will allow us to work together to deliver long term value to our customers, through the efficient supply of an attractive and competitive new iron ore blend in China,” Power said.
The miner also alluded to the potential for Vale to invest in Fortescue through a minority acquisition of shares.
A figure of 15% was bandied about by the media on Tuesday, but the Australian miner downplayed the reports, reiterating the MoU was non-binding at this stage.
Fortescue did confirm, however, that the MoU contemplates a share acquisition of between 5% and 15% of Fortescue by Vale.
The Australian company’s market bounce saw shares reach a high of $3.29 at one point on Tuesday, before closing at $2.79.
Monday’s closing price of $3.08 a share was Fortescue’s highest close since November 2014. The miner has struggled through a slumping iron ore price, which has left it battling to cut costs at its West Australian iron ore mining, rail and export operations.